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Acquisitions | 12 Months Ended
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Jan. 01, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions 2021 In the third quarter of 2021, the Company acquired all partnership interests and shares in The Clouth Group of Companies (Clouth), for $92,864,000, net of cash acquired plus debt assumed. The majority of the Clouth companies were acquired on July 19, 2021 and the acquisition of the last legal entity occurred on August 10, 2021, which the Company accounted for as a noncontrolling interest during the period from July 19, 2021 to August 10, 2021. The Company funded the purchase price with euro-denominated borrowings under its revolving credit facility and existing cash. Clouth, which is included in the Company's Flow Control segment, is a leading manufacturer of doctor blades and related equipment used in the production of paper, packaging, and tissue. The Company expects several synergies in connection with this acquisition, including deepening its presence in the growing ceramic blade market and expansion of sales at its existing businesses by leveraging Clouth's complementary global geographic footprint. Clouth has three manufacturing facilities in Germany and one in Poland. Goodwill from the Clouth acquisition was $25,806,000, of which $6,836,000 is expected to be deductible for tax purposes over 15 years. In addition, intangible assets acquired were $34,467,000, of which $5,326,000 is expected to be deductible for tax purposes over 15 years. The Company recorded revenue of $23,221,000 and an operating loss of $4,068,000 for Clouth from the date of acquisition, including amortization expense of $3,481,000 associated with acquired profit in inventory and backlog and $2,710,000 of acquisition transaction costs. On August 23, 2021, the Company acquired all the outstanding equity securities in East Chicago Machine Tool Corporation (Balemaster) and certain assets of affiliated companies for $53,747,000, net of cash acquired. Balemaster, which is included in the Company's Material Handling segment, is a leading U.S. manufacturer of horizontal balers and related equipment used primarily for recycling packaging waste at corrugated box plants and large retail and distribution centers. The Company funded the purchase price with borrowings under its revolving credit facility. The Company expects several synergies in connection with the acquisition, including expansion of its presence in the secondary material processing market and creation of new opportunities for leveraging its high-performance balers produced in Europe. Goodwill from the Balemaster acquisition was $26,836,000, none of which is deductible for tax purposes. In addition, intangible assets acquired were $28,060,000, none of which is deductible for tax purposes. The Company recorded revenue of $9,038,000 and operating loss of $641,000 for Balemaster from the date of acquisition, including amortization expense of $2,042,000 associated with acquired profit in inventory and backlog and $782,000 of acquisition transaction costs. In the fourth quarter of 2021, the Company acquired the assets of a business in India, which is included in its Industrial Processing segment, for approximately $2,882,000. The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for Clouth and the Company's other acquisitions in 2021. The final purchase accounting and purchase price allocations remain subject to change as the Company continues to refine its preliminary valuation of certain acquired assets and liabilities assumed and the valuation of acquired intangibles, which may result in adjustments to the assets and liabilities, including goodwill. Measurement period adjustments in 2021 did not have a material effect on the Company's consolidated balance sheet or statement of income.
(In thousands) |  | Clouth |  | Other |  | Total
Net Assets Acquired: |  |  |  |  |  |
Cash and Cash Equivalents |  | $ | 4,923 |  |  | $ | 3,757 |  |  | $ | 8,680 |
Accounts Receivable |  | 6,808 |  |  | 1,641 |  |  | 8,449 |
Inventories |  | 14,119 |  |  | 4,628 |  |  | 18,747 |
Property, Plant, and Equipment |  | 24,498 |  |  | 5,143 |  |  | 29,641 |
Other Assets |  | 5,309 |  |  | 3,167 |  |  | 8,476 |
Definite-Lived Intangible Assets |  |  |  |  |  |
Customer relationships |  | 20,192 |  |  | 23,100 |  |  | 43,292 |
Product technology |  | 8,915 |  |  | 2,700 |  |  | 11,615 |
Tradenames |  | — |  |  | 1,400 |  |  | 1,400 |
Other |  | 401 |  |  | 1,560 |  |  | 1,961 |
Indefinite-Lived Intangible Assets |  |  |  | — |  |  |
Tradenames |  | 4,959 |  |  | — |  |  | 4,959 |
Goodwill |  | 25,806 |  |  | 27,951 |  |  | 53,757 |
Total assets acquired |  | 115,930 |  |  | 75,047 |  |  | 190,977 |
Short-term Obligations and Current Maturities of Long-term Obligations |  | 1,393 |  |  | — |  |  | 1,393 |
Accounts Payable |  | 1,287 |  |  | 797 |  |  | 2,084 |
Long-Term Deferred Income Taxes |  | 9,465 |  |  | 6,698 |  |  | 16,163 |
Long-Term Obligations |  | 4,244 |  |  | — |  |  | 4,244 |
Other Liabilities |  | 7,391 |  |  | 7,166 |  |  | 14,557 |
Total liabilities assumed |  | 23,780 |  |  | 14,661 |  |  | 38,441 |
Net assets acquired |  | $ | 92,150 |  |  | $ | 60,386 |  |  | $ | 152,536 |
Purchase Price: |  |  |  |  |  |
Cash Paid |  | $ | 92,150 |  |  | $ | 60,386 |  |  | $ | 152,536 |
The weighted-average amortization period for Clouth's definite-lived intangible assets is 19 years, including weighted-average amortization periods of 24 years for customer relationships and 10 years for product technology. The weighted-average amortization period for the Company's other acquisitions' definite-lived intangible assets is 16 years, including weighted-average amortization periods of 17 years for customer relationships, 13 years for product technology, and 16 years for tradenames. Unaudited Supplemental Pro Forma Information The following unaudited pro forma information provides the effect of the Company's 2021 acquisition of Clouth as if it had occurred at the beginning of 2020:
(In thousands, except per share amounts) |  | January 1, 2022 |  | January 2, 2021
Revenue |  | $ | 812,016 |  |  | $ | 682,248 |
Net Income Attributable to Kadant |  | $ | 90,184 |  |  | $ | 55,760 |
Earnings per Share Attributable to Kadant |  |  |  |
Basic |  | $ | 7.79 |  |  | $ | 4.86 |
Diluted |  | $ | 7.74 |  |  | $ | 4.82 |
The historical consolidated financial information of the Company and Clouth has been adjusted in the pro forma information above to give effect to pro forma events that are (i) directly attributable to the acquisition and related financing arrangements, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable. Pro forma results include the following non-recurring pro forma adjustments: •Pre-tax charge to cost of revenue of $3,082,000 in 2020 and reversal of $3,082,000 in 2021, for the sale of inventory revalued at the date of acquisition. •Pre-tax charge to SG&A expenses of $3,109,000 in 2020 and reversal of $2,710,000 in 2021 and $399,000 in 2021, for acquisition costs and intangible asset amortization related to acquired backlog, respectively. •Estimated tax effects related to the pro forma adjustments. Pro forma results in 2020 include a pre-tax gain of $4,409,000 from the forgiveness of a shareholder loan at Clouth. These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisition of Clouth occurred as of the beginning of 2020, or that may result in the future. The Company's pro forma results exclude the Company's other acquisitions in 2021 as the inclusion of those results would not have been materially different from the pro forma results presented above had the acquisitions occurred at the beginning of 2020. 2020 On June 1, 2020, the Company acquired Cogent Industrial Technologies Ltd. (Cogent), which is included in its Industrial Processing segment, for approximately $6,866,000, net of cash acquired. The Company funded the acquisition through borrowings under its revolving credit facility. Intangible assets acquired primarily relate to customer relationships with a fair value of $3,350,000. Cogent, based in British Columbia, Canada, is an industrial automation and controls solution provider that offers expertise in process technology integration, industrial automation and controls, industrial safety, project management, and operational performance management systems. On May 28, 2020, the Company also acquired certain intellectual property from a company in Austria, which is included in its Industrial Processing segment, for $416,000, of which $229,000 was paid in the second quarter of 2020 and $125,000 in the first quarter of 2021. The Company expects to pay the remaining amount no later than the first quarter of 2022. Intangible assets acquired represent product technology with a fair value of $557,000 at acquisition date. 2019 On September 3, 2019, the Company acquired certain assets of a business in Brazil, which is included in its Flow Control segment, for approximately $407,000 in cash. On January 2, 2019, the Company acquired, directly and indirectly, all the outstanding equity interests of Syntron Material Handling Group, LLC and certain of its affiliates (SMH) pursuant to an equity purchase agreement, dated December 9, 2018, for $176,855,000, net of cash acquired. The Company funded the acquisition through borrowings under its revolving credit facility. SMH, which is included in the Company's Material Handling segment, has manufacturing operations in Mississippi, United States, and China, and is a leading provider of material handling equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper. Goodwill from the SMH acquisition was $78,592,000, of which $59,195,000 is expected to be deductible for tax purposes over 15 years. In addition, intangible assets acquired were $83,020,000, of which $69,969,000 is expected to be deductible for tax purposes over 15 years. For 2019, the Company recorded revenue of $83,364,000 and operating income of $3,132,000 for SMH from the date of acquisition, including amortization expense of $4,872,000 associated with acquired profit in inventory and backlog and $843,000 of acquisition transaction costs. The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for SMH.
(In thousands) |  | January 2, 2019
Net Assets Acquired: |  |
Cash, Cash Equivalents, and Restricted Cash |  | $ | 2,431 |
Accounts Receivable |  | 10,275 |
Inventories |  | 13,061 |
Property, Plant, and Equipment |  | 7,383 |
Other Assets |  | 12,054 |
Definite-Lived Intangible Assets |  |
Customer relationships |  | 58,300 |
Product technology |  | 11,000 |
Other |  | 4,220 |
Indefinite-Lived Intangible Assets |  |
Tradenames |  | 9,500 |
Goodwill |  | 78,592 |
Total assets acquired |  | 206,816 |
Accounts Payable |  | 3,380 |
Other Current Liabilities |  | 7,954 |
Long-Term Lease Liabilities |  | 15,244 |
Long-Term Deferred Income Taxes |  | 952 |
Total liabilities assumed |  | 27,530 |
Net assets acquired |  | $ | 179,286 |
Purchase Price: |  |
Cash Paid |  | $ | 179,286 |
The weighted average amortization period for the definite-lived intangible assets above is 14 years, including weighted average amortization periods of 15 years for customer relationships, 14 years for product technology, and 8 years for other intangible assets. Unaudited Supplemental Pro Forma Information The following unaudited pro forma information provides the effect of the Company's 2019 acquisition of SMH as if it had occurred at the beginning of 2018:
(In thousands, except per share amounts) |  | December 28, 2019
Revenue |  | $ | 704,644 |
Net Income Attributable to Kadant |  | $ | 56,409 |
Earnings per Share Attributable to Kadant |  |
Basic |  | $ | 5.02 |
Diluted |  | $ | 4.92 |
The historical consolidated financial information of the Company and SMH has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the Company, and are factually supportable. Pro forma results include the following non-recurring pro forma adjustments, which have been included in the determination of pro forma net income for the year ended December 29, 2018 (not presented), as follows: •Pre-tax reversal of $843,000 to SG&A expenses in 2019 for acquisition transaction costs. •Pre-tax reversal of $3,549,000 to cost of revenue in 2019 for the sale of inventory revalued at the date of acquisition. •Pre-tax reversal of $1,323,000 to SG&A expenses in 2019 for intangible asset amortization related to acquired backlog. •Tax effects related to pro forma adjustments. These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisition of SMH occurred as of the beginning of 2018, or that may result in the future.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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